Oil Markets Unfazed By $200 Billion Trade War Escalation – OIR 190918

This week, we will take a quick look at some of the critical figures and
data in the energy markets this week.

We will then look at some of the key market movers early this week before
providing you with the latest analysis of the top news events taking place in
the global energy complex over the past few days. We hope you enjoy.

- OPEC members earned a combined $567 billion in oil export
revenue in 2017, up 29 percent from a year earlier.

- The increase was due to both higher oil prices and higher
export levels.

- The EIA projects that OPEC’s oil export revenue will climb
to $736 billion this year, a 30 percent increase over 2017.

- Duke
Energy (NYSE: DUK) says it has restored power to 1.2 million
customers in the wake of Hurricane Florence. Around 300,000 people were without
power as of Monday. Meanwhile, two of Duke’s coal ash landfills spilled during
the storm.

Tuesday September 18, 2018

Oil prices rose on news that Saudi Arabia is comfortable with Brent above $80
per barrel, offsetting the concerns that have been building over the U.S.-China
trade war.

Saudi Arabia comfortable
with $80 oil. Bloomberg reported that Saudi Arabia is not
afraid of oil heading north of $80 per barrel, a bullish sign that suggests
that Riyadh might not ramp up production to offset declines from Iran. “It
casts doubts on whether Saudi Arabia will increase output to compensate for the
loss of Iranian crude once sanctions come into effect,” said Carsten Fritsch, an analyst
at Commerzbank. Meanwhile, U.S. Secretary of Energy Rick Perry dismissed
concerns about a supply crunch, arguing that Saudi Arabia, Russia and the U.S.
could add enough supply to the market to compensate for Iran. “I don’t foresee
spikes,” Perry said.

Iran has lost 900,000 bpd
in oil exports since April. U.S. sanctions on Iran are set to
go into effect in November, but countries have already been slashing purchases.
Iran has lost an estimated 900,000 bpd of crude oil exports since April, with
shipments down to 1.6 million barrels per
day this month. “Iranian oil exports are coming down pretty hard,” Roger Diwan,
a veteran oil analyst at consultant IHS Markit Ltd., told Bloomberg.

Trump steps up trade war
with $200 billion in tariffs. The Trump administration moved
forward on a highly-anticipated plan to escalate the trade war with China, announcing $200 billion in
tariffs on Chinese goods. The tariffs will start at 10 percent and go into
effect on September 24, but will rise to 25 percent by January 1. He also
suggested that an additional $267 billion in tariffs are in the works. The
effects of a trade war have lingered as a downside threat to the U.S. and
global economy, but unlike earlier rounds of tariffs, this tranche will affect
consumer goods. Moreover, China is expected to retaliate, with the potential
for tariffs on U.S. oil and gas exports. That could put a dent in crude oil exports
while also threatening the economics of
future LNG export terminals.

Hedge funds bullish on
oil. Hedge funds and other money managers have remained bullish on Brent
futures, but cut their net length on WTI last week, likely because of fears
about the impact of Hurricane Florence.

European Commission opens
antitrust investigation into BMW, Daimler AG, Volkswagen AG. The
European Commission’s antitrust body opened an investigation into top
German automakers over a possible collusion scheme to limit the development of
emissions controlling technology. The investigation comes after the VW diesel
emissions cheating scandal.

Solar plus batteries
becoming cheaper than natural gas. According to Bloomberg New
Energy Finance, new solar projects that come equipped with batteries are
becoming cheaper to build per megawatt-hour than natural gas in parts of the
U.S. southwest. For example, solar-plus-battery projects cost $36 per
megawatt-hour in the southwest for plants going into service in 2021, while
combined-cycle gas projects cost $47/MWh. But this could just be the beginning.
“This won’t be contained to the Southwest,” BNEF analyst Hugh Bromley said. “This is spreading and will
continue to spread.

Spanish oil company Cepsa
to launch IPO. Spanish oil and gas company Cepsa announced
plans to launch an IPO later this year, selling around 25 percent of the
company’s shares. Cepsa is owned by Abu Dhabi state investor Mubadala. The IPO
could be the largest public offering for an
oil company in more than a decade.

China to lend $5 billion
to Venezuela. China agreed to lend $5 billion to Venezuela,
to be paid back with oil. Bonds of PDVSA rose on the news. China has lent
around $70 billion to Venezuela over the past decade, but had seemed to cut off
the increasingly indebted and cash-strapped nation. The latest loan will loosen
the noose just a bit. “This will give the government some breathing room,”
Asdrubal Oliveros, director of Ecoanalitica, told Bloomberg.

Shell announces plan to
control methane. Royal Dutch Shell (NYSE: RDS.A) announced plans to limit methane
emissions from its oil and gas operations to 0.2 percent by 2025.

Two ethanol plants to
shut down.Green
Plains Inc. (NASDAQ: GPRE) said it was shutting down two
ethanol plants in Iowa and cutting production at another in Minnesota because
of poor profit margins. The announcement comes after the Trump administration’s
trade war with China has cut off access to the Chinese market for ethanol. The
result has been an ethanol supply glut in the U.S., which has pushed down
prices.